British Pound Outlook
The British Pound has fallen nearly 0.75% against the U.S. Dollar and 0.5% against the Euro on Tuesday as the currency’s sell-off enters a second day, ensuring the key respective levels of 1.11 and 1.31 are breached. The Pound is in fact lower against the majority of its peers, including the Australian, New Zealand and Canadian Dollars in a sign of how widespread the sell-off is.
There are two reasons behind the fall in Sterling: 1) Global stock markets are falling, confirming the Pound’s positive relationship with stock markets and 2) Brexit trade negotiations are close to collapsing.
The stock market sell-off is being driven by a sizeable decline in U.S. technology stocks as air is let out of what was fast becoming an overpriced bubble. However, the consensus amongst economists and market specialists is that the global recovery should ultimately prove supportive for stocks in the long run, which should at least offer some support for Sterling over coming weeks.
The Pound has fallen as expectations that trade negotiations will fail rise, but some analysts say the talks will likely still result in a deal as this ‘hard ball’ mentioned by Rabobank’s Avery is to be expected and ultimately the two sides will find a compromise.
“Brexit headline risks may put a short-lived dent in GBP,” says Viraj Patel, Strategist at Arkera. “Brexit headlines have been weighing on GBP … however, this may be a bit of profit-taking given the Pound’s recent rally. We see a high bar for material GBP shorts to be rebuilt on any No Deal scaremongering in negotiations (as we’ve been here plenty of times before). Like the ‘boy who cried wolf’ – investors may only believe it when the wolf actually shows up.”
Indeed, the Pound rallied through the summer months despite regular headlines that the EU and UK’s negotiating teams were struggling to reach the necessary compromises to strike a deal and for now the GBP/EUR remains above the fulcrum of 1.11 and the GBP/USD remains above the psychologically significant 1.31 region.
Prime Minister Boris Johnson spoke with his French counterpart Emmanuel Macron on Monday, amidst the negative Brexit headlines, and the official takeaway from the talks was that they were cordial and that both sides remain committed to a Brexit deal.
A newswire report read, “UK PM Johnson and French President Macron agreed on importance of making progress this month and reaching a conclusion on talks quickly.
Macron tweeted: “Very good exchange with Boris Johnson. We will strengthen our cooperation against migrant smugglers. We discussed the follow-up to the poisoning of Alexei Navalny, the situation in Lebanon and the future relationship between the European Union and the United Kingdom.”
The two sides remain engaged and while the negotiating teams have hit deadlock the market is likely to maintain a focus on the mid-October EU summit which has been established as a deadline by both sides for any real gauge as to whether or not the EU and UK will reach a deal or not.
GBP/US Dollar Exchange Rate
Today’s Forex Rates
GBP/US Dollar FX Polls
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.32.
The projected lower bound is: 1.28.
The projected closing price is: 1.30.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 4.0816. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 40.55. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 15 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -156.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.003 at 1.296. Volume was 78% below average (consolidating) and Bollinger Bands were 4% narrower than normal.
Open High Low Close Volume 1.298 1.299 1.295 1.296 28,051
Technical Outlook Short Term: Oversold Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1.32 1.29 1.27 Volatility: 12 10 14 Volume: 110,642 118,346 120,398
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 1.7% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term.
Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 0 periods.
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